If you own property in the UAE and wish to control who it passes on to, it’s important to take steps now to protect your assets.
When a UAE property owner dies intestate, their assets can be frozen from a movability point of view and through the probate process then distributed according to a pre-determined formula in accordance with an interpretation of Sharia law – often not in accordance with the owner’s wishes. This is just due to the different interpretations of the multiple cultures that flow through the UAE.
One way you can prevent this is to make a will. But there are other options available, such as gifting or transferring the asset to a holding company, which may give you a better outcome and more options.
This guide will help you consider your options.
1. Transfer within the family
You can gift your UAE property to your closest family members.
You will have your own preferences as to who takes on your property. In order to ensure your wishes are adhered to, you can gift UAE property to a family member or members of your choice.
Gifting is one way to avoid future issues in the event of no will being in place, regarding Sharia law distribution. It also allows you to simplify succession issues.
For example, a husband may transfer his share of a property to his wife to avoid his siblings from inheriting it in the event of his death. Equally, a spouse may be removed from any inheritance following a divorce settlement.
How to protect your UAE property by gifting it
A gift or ‘grant’ transfer is a voluntary transfer from one individual to another. To qualify, the property must be transferred among first degree relatives, meaning either your parents or children.
To proceed with a gift, you must pay off any outstanding charges relating to the property and obtain:
• Identification documents
• The original title deed to prove ownership
• An affection plan to prove the location and size
• A value estimation certificate from the land department
• A no objection certificate (NOC) from the developer if the property is freehold
• Proof of kinship, such as a birth certificate or marriage certificate
• A declaration of grant from the Dubai courts if you are a UAE passport holder and citizen
Applicants must attend the relevant registration authority to submit the documents and pay the transfer fees before the new title deed can be issued.
A big advantage of a gift transfer as opposed to a sale and purchase transfer is that you save money on transfer fees. In Dubai, for example, the sale and purchase transfer fee is 4 per cent of the sale price, whereas the gift transfer fee is just 0.125 per cent of the value or its share, provided that is no less than Dhs2,000.
There are also registration fees to pay of Dhs2,000 or Dhs4,000, depending on the size of the property. In addition, UAE nationals in non-freehold areas must pay Dhs5,000 in ‘urgent processing fees’.
2. Transfer to a company
You can protect your property through a holding company.
Another way to avoid unplanned inheritance issues is to transfer ownership of your property to a holding company. The company’s shareholders will be the individuals who formerly owned the property – so they continue to own the property but indirectly through a different entity.
How to protect your property through a holding company
First you need to set up an offshore holding company. In Dubai, JAFZA offshore companies are currently the only offshore companies that are allowed to own property. DWC was briefly used for a time, but JAFZA offshore remains the only option. A company formation specialist will help you with this. Then you can transfer ownership of your property to the company. The documents required, registration process and fees are similar to those for gift transfers.
The benefit of transferring your property to an offshore holding company is that you can continue to exercise control – and effectively ownership – of your property in the UAE. In addition, you can maintain anonymity, benefit from liability protection, and enjoy tax advantages.
3. Make a will
You can safeguard your property by making a will.
It’s always a good idea to protect your property by way of a will. In the UAE this is essential because of the default to Sharia law when no will exists.
Without a will in place, recognised by the UAE legal system, the process of inheriting assets after death can be time consuming, costly and fraught with legal complexity. Your heirs will not be able to enforce your wishes.
When you make a will, you safeguard the interests of your family no matter which country you call home.
How to protect your property via a will
To help make the process as straightforward as possible, special registries have been set up in Dubai and Abu Dhabi for non-Muslims investing or living in each emirate. These provide the option to pass on your assets and/or appoint guardians for your children, in accordance with your instructions.
In Dubai, for example, the DIFC Wills Service Centre provides a relatively simple and efficient mechanism for non-Muslims to bequeath their estates. This is subject to a formal inheritance registration process which functions as an opt-in mechanism. All probate grants are issued by judges of the DIFC Court.
However, as with gift transfers, you need to ensure you follow the correct procedures, meet the required conditions, and submit a significant amount of paperwork.
DIFC conditions stipulate:
• You are not, and have never been, a Muslim
• You must be over 21 years of age
• You own assets in Dubai and/or Ras Al Khaimah
• Any children for whom you wish to appoint guardians must be habitually resident in Dubai or Ras Al Khaimah
The fee for a single, full will is currently Dhs10,000, payable to the DIFC. While that might seem like a hefty sum to register a will, the protection it provides makes it a wise and necessary investment when it comes to being certain about what will happen to your assets.
Talk to an expert
For property owners in the UAE, protecting your assets in one of the above ways will help you and your family avoid costly inheritance battles. The options exist for you to remove that prospect in good time but it is a complex area.
A local specialist can guide you through the process, making sure that you understand your options thoroughly and helping you avoid expensive mistakes. Having invested in something of such value, it makes sense to protect it.
Michael Burke is the managing partner of Arabian Escapes